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India Money Market Outlook:Gilts seen up on lower-than-view India CPI

Informist, Thursday, Oct 12, 2023


MUMBAI – Prices of government bonds may open higher on Friday as India’s CPI inflation data for September, released after market hours, came in lower than expected, dealers said. 


Overnight indexed swap rates may open lower as domestic inflation data for September was better than expected.


India’s CPI combined inflation rate for September was at 5.02%, against the expectation of 5.4% in an Informist poll. The Reserve Bank of India had projected inflation at 5.0%, but estimates in the poll were in a 5.2-6.2% range.


The US CPI inflation print for September stood at 3.7%, against 3.6% expected in a Dow Jones poll. The reading suggested the Federal Open Market Committee could keep rates higher for longer, but did not convince one way or another whether it would call for another rate hike in the world’s largest economy, dealers said.


A sharp move in US Treasury yields and crude oil prices could also be a trigger for gilt prices and swap rates at open.


The three-day call money rate may open above the repo rate of 6.50% due to likely demand for funds from some banks in early trade as banking system liquidity recently slipped back into deficit.



On Friday, prices of government bonds may open higher due to lower-than-expected CPI inflation data for India for September, dealers said. Traders may avoid aggressive bets due to caution ahead of a 340-bln-rupee gilt auction.


At the auction, the government will sell 120 bln rupees of the 7.17%, 2030 bond, 100 bln rupees of the 7.18%, 2037 bond, and 120 bln rupees of the 7.25, 2063 bond.


The yield on the 10-year benchmark 7.18%, 2033 bond is seen in a range of 7.27-7.33%. Today, the 2033 bond ended at 99.17 rupees or 7.2977% yield.



Swap rates may open lower as India’s CPI inflation print for September was lower than expected, dealers said.


The swap rate in the one-year segment is seen at 6.90-7.10% and in the five-year segment at 6.55-6.85%. Today, the one-year swap rate closed at 6.98% and the five-year rate settled at 6.70%, according to the website of Clearing Corp of India.



The three-day call money rate may open above the repo rate of 6.50% due to likely demand for funds from some banks in early trade amid a liquidity deficit in the banking system.


During the day, the three-day call rate is seen at 6.25-6.85%, dealers said. Today, the one-day call rate ended at 6.50%.



–Govt to auction three gilts worth 340 bln rupees



–Net inflows of 9.85 bln rupees. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repos.


* Inflows

–9.85 bln rupees as coupons on state loans


* Outflows





Reported by M.C. Adhiinthran

Edited by Avishek Dutta


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


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Source: Cogencis

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